Why does eBay need Skype ?

Agreed that Skype under performed, that its quality can be sometimes quite indifferent. But what was eBay doing in the first place, paying US$2.6 billion for Skype, which was offering a service that was fast commoditized, in a market where competition was coming from multiple categories of players ?

It is not that Skype brought to eBay customers for its core auction business. Nor would auctioneers and bidders stop doing business on eBay if they couldn’t click-and-call through Skype. It is when a company starts wanting to own all the plumbing and fixtures, which is not part of its core business, that problems begin. Internet telephony is certainly not eBay’s core business.

On Monday, eBay, of San Jose, California, said it was taking a $1.43 billion charge related to the acquisition of Skype, according to a report in the International Herald Tribune.

Since the purchase in 2005, Skype's membership rolls have swelled past 220 million. But the company has not had as much success making money as it has had growing. Skype does not charge its users for calls to other Skype users. There is only a small fee for calls to landline numbers and cellphones, according to the International Herald Tribune.

In the event, Skype earned $90 million during the second quarter of 2007, far below eBay's projections.

Skype was one of the first movers in the pure-play VOIP (Voice over Internet Protocol) market, but its share of international VOIP traffic was in 2006 smaller than that of the international carriers it was expected to displace, according to TeleGeography, a research division of PriMetrica Inc. While the volume of international traffic routed via Skype was significant, the quantity was still small when compared to a global switched and VoIP traffic base of 264 billion minutes, it said in a report. Computer-to-computer traffic between Skype users in 2005 was equivalent to 2.9 percent of international carrier traffic in 2005 and approximately 4.4 percent of total international traffic in 2006.

The company’s business is said to have flagged because of less-than expected business in its paid VOIP calls business to landline and mobile phones, even as Skype-to-Skype calls boomed.

It appears that VOIP services offered by carriers, and PSTN calls, continue to dominate the market, despite forecasts that VOIP would ease out PSTN. It may be true that VOIP, because it is cheaper, will progressively ease out PSTN. But the new business will probably go to the large carriers who have the capital to invest in infrastructure, an existing stable customer base, and existing originating and terminating connections for calls.

That is why we have a new crop of VOIP service providers that prefer to work with the big telcos, providing the VOIP piece, while originating calls and terminating calls through the telcos. “ We put money in the telcos pockets. We wouldn’t have fight with the telcos because they are established and strong,” a Jajah Inc. executive told Network World some months ago.

The success of pure play VOIP is as yet not certain. TMCnet reports that Paul Budde Communication, an independent global telecommunications research and consultancy company, has released a report, called 2007 North America — Telecoms, Broadband and Mobile Statistics, which points out that North American cable providers are reaping the benefits of a consumer market looking for less expensive phone service coupled with added features and ease of billing.

The competition to pure-play VOIP service providers is hence multi-pronged.

Which brings me back to my question – what is eBay doing slugging it out in the patently unpredictable VOIP market. What benefits does it expect from deviating from its core online auction business ?

To be sure, some auctioneers may like to have “click-to-call” features on eBay. But eBay needn’t have bought a large VOIP firm to deliver that. Whether eBay encourages it or not, any number of VOIP players are offering click-to-call “buttons” and other services on eBay, social networks, blogs, wherever you want. In the end they meet eBay’s fond desire to offer click-to-call. But first eBay may have to spit out Skype to folks more at ease, and street smarter in the VOIP market.

Internet reflects, nay amplifies social problems

The Internet is a mirror to the population that uses it, Google Inc.’s vice president and chief Internet evangelist Vinton Cerf told the BBC in August. “When you have a problem in the mirror you do not fix the mirror, you fix that which is reflected in the mirror”, Cerf said while rejecting regulation of the Internet.

To my mind, to stretch Cerf’s metaphor a little, the Internet is like a concave shaving mirror. It magnifies and throws up every blemish in society, because it offers a far greater degree of anonymity, and much greater and easier access to people.

In the old days, I had to worry about having my pocket picked by a person next to me in the subway or a bus or in the park. These days, using the Internet, a person as far away as Lagos or Moscow can dip into my pocket.

Recently I put up my laptop for sale on a popular auction site. It was my first auction, and I was delighted that someone had made me an offer within less than an hour of my posting my item ! Then the bidder got in touch with me and requested me to do him a favor and ship the laptop to his dear friend in Nigeria in time for his birthday. Incidentally, I has specified when placing the laptop for auction, that I would not arrange to ship the product.

The bidder however persisted, and even sent me an online link to his bank that showed that the funds for paying for the laptop had been kept in escrow, for disbursement as soon as I proved that the item had been shipped to his dear friend. Unfortunately, when I traced the bank web-site to its owner, I found that it wasn’t owned by a bank, but by a resident of London.

After seven days wasted, and canceling the transaction, I put up the item for auction again. Guess what ? I had a bidder again within the hour. No two guesses: the bidder wanted his girlfriend in Benin to have it in time for her birthday.

I still don’t know, and frankly don’t care who were the folks I dealt with. Were they really Nigerian scammers, as some pundits told me ? The rub is that I had been promised by the auction site that I could theoretically reach customers throughout the world. All I had succeeded in doing was attracting to myself anonymous criminal elements from around the world.

The recent hacker attack on the Bank of India site in India, and others in other countries, testify that we are at a big risk on the Internet when we least expect it. According to this report, you just had to go to the Bank of India web-site and your computer was hosed with a whole lot of compromising malware and Trojans.

Even my email is not safe. I am not talking only about folks dropping viruses and Trojans through my mailbox. Security software folks like Symantec have made a great business out of their ability to block and remove this vermin.

I am talking about the large variety of offers, some offering to cure my sexual debilitations they are privy to, others promising to keep me in a diazepam-induced Nirvana for as long as I can pay for it, and still others thoughtfully offering me a chance to share in a rich widow’s inheritance.

Apart from their being a nuisance, there is the chance that somebody may be gullible enough to be inveigled into these deals. There are a large number of reports that confirm that a lot of folks in the US have in fact got into deep trouble trying to share in someone’s loot.

The Internet gives us the most valuable and scary insights into the depths human nature can sink to, when given global access and anonymity. Does this mean that we should shut down the Internet ? No ways, I make my money of it, I download music far faster than if I had waited for the local brick-and-mortar store to stock it, I can research information on the net, I can chat up distant friends on instant messengers, people under repressive regimes can now communicate with the outside world !

The point is that we have to be very, very careful, starting with the realization that it is not a brave new world out there in cyberspace.

The Internet and its promise of Second Life is not the promise of liberation from a cruel terra firma. It is the same sad world we live in, only a lot more unsafe, because the criminals can now get you in the privacy and security of your home. Forewarned, as the old saw goes, is forearmed. Irrational exuberance could have deadly results.

Internet reflects, nay amplifies social problems

The Internet is a mirror to the population that uses it, Google Inc.’s vice president and chief Internet evangelist Vinton Cerf told the BBC in August. “When you have a problem in the mirror you do not fix the mirror, you fix that which is reflected in the mirror”, Cerf said while rejecting regulation of the Internet.

To my mind, to stretch Cerf’s metaphor a little, the Internet is like a concave shaving mirror. It magnifies and throws up every blemish in society, because it offers a far greater degree of anonymity, and much greater and easier access to people.

In the old days, I had to worry about having my pocket picked by a person next to me in the subway or a bus or in the park. These days, using the Internet, a person as far away as Lagos or Moscow can dip into my pocket.

Recently I put up my laptop for sale on a popular auction site. It was my first auction, and I was delighted that someone had made me an offer within less than an hour of my posting my item ! Then the bidder got in touch with me and requested me to do him a favor and ship the laptop to his dear friend in Nigeria in time for his birthday. Incidentally, I has specified when placing the laptop for auction, that I would not arrange to ship the product.

The bidder however persisted, and even sent me an online link to his bank that showed that the funds for paying for the laptop had been kept in escrow, for disbursement as soon as I proved that the item had been shipped to his dear friend. Unfortunately, when I traced the bank web-site to its owner, I found that it wasn’t owned by a bank, but by a resident of London.

After seven days wasted, and canceling the transaction, I put up the item for auction again. Guess what ? I had a bidder again within the hour. No two guesses: the bidder wanted his girlfriend in Benin to have it in time for her birthday.

I still don’t know, and frankly don’t care who were the folks I dealt with. Were they really Nigerian scammers, as some pundits told me ? The rub is that I had been promised by the auction site that I could theoretically reach customers throughout the world. All I had succeeded in doing was attracting to myself anonymous criminal elements from around the world.

The recent hacker attack on the Bank of India site in India, and others in other countries, testify that we are at a big risk on the Internet when we least expect it. According to this report, you just had to go to the Bank of India web-site and your computer was hosed with a whole lot of compromising malware and Trojans.

Even my email is not safe. I am not talking only about folks dropping viruses and Trojans through my mailbox. Security software folks like Symantec have made a great business out of their ability to block and remove this vermin.

I am talking about the large variety of offers, some offering to cure my sexual debilitations they are privy to, others promising to keep me in a diazepam-induced Nirvana for as long as I can pay for it, and still others thoughtfully offering me a chance to share in a rich widow’s inheritance.

Apart from their being a nuisance, there is the chance that somebody may be gullible enough to be inveigled into these deals. There are a large number of reports that confirm that a lot of folks in the US have in fact got into deep trouble trying to share in someone’s loot.

The Internet gives us the most valuable and scary insights into the depths human nature can sink to, when given global access and anonymity. Does this mean that we should shut down the Internet ? No ways, I make my money of it, I download music far faster than if I had waited for the local brick-and-mortar store to stock it, I can research information on the net, I can chat up distant friends on instant messengers, people under repressive regimes can now communicate with the outside world !

The point is that we have to be very, very careful, starting with the realization that it is not a brave new world out there in cyberspace.

The Internet and its promise of Second Life is not the promise of liberation from a cruel terra firma. It is the same sad world we live in, only a lot more unsafe, because the criminals can now get you in the privacy and security of your home. Forewarned, as the old saw goes, is forearmed. Irrational exuberance could have deadly results.